Renewable energy has become the “talk of the town" due to the fact that the Earth's resources are extremely limited and hence companies are now racing to find, invent, innovate and build upon various types of renewable energy projects.
For example : In India alone there have been more than 682 startups in the renewable energy sector which have opened up from the year 2016 to 2022 alone [1]. This is also reflected in the international scenario through the rise of Elon Musk’s Tesla which specializes in the manufacture of electric vehicles which run on Lithium ion batteries and in doing so reduce dependency on fossil fuels and also decrease air pollution by huge volumes from being a company which was only a little more than 20 billion dollars in the year 2018 the companies net worth has quadrupled to more than 81 billion dollars in a span of just 5 years from 2018 to 2023 [2]. In the light of these scenarios where renewable energy has been found to be the sustainable way forward for mankind, companies and governments alike are now focusing solely on capturing the market with their own renewable energy products, replacing the interests of the customers at large in favor of larger profits. An example of such a measure taken can be that of European Union and other states such as California passing laws banning vehicles that run on fossil fuels and trying to discourage people from buying and using vehicles that run on fossil fuels in an effort to completely ban and phase out fossil fuel run vehicles by the year 2035 [3] [4]; and in doing so they also favor existing electric vehicle companies and promote their growth against the growth of other companies by passing laws that influence or force people to buy renewable energy products from just these select group of companies. This why we need laws against anti competitive behavior where only a few select group of Companies can capture the renewable energy market in order to prevent them from setting up a monopoly which in the long run can harm the interest of customers at large by degrading the companies normal standards of care for the customers interest as these customers have no other options to buy from. In this article we shall take a look at what is competition law and why is it so relevant when it comes to the mergers and acquisitions of companies in the renewable energy sector and should there be any changes that should be made to the existing laws for anti-competitive behavior or should new laws be passed to prevent anti-competitive behavior and monopolies in the renewable energy sector.
What is Competition law?
The definition of competition law can be found in Sections 3 to 6 of the Competition act of 2002 [5] the purpose of which is to prevent certain anti-competitive agreements between companies or customers or manufacturers, combinations between companies or rather mergers between companies and also other forms of anti competitive behavior which aims to establish a Monopoly of these companies that attempt to engage in this behavior within the market .
Growth of Renewable Energy Sector in India :
The renewable energy sector in India is not just growing but rather booming in exponential numbers when compared to the rest of the world. This is more than evident from the fact that more than 40% of India's electricity that is produced annually is now produced from renewable energy sources such as hydropower dams, solar energy, wind energy and tidal energy [6] [7]. This is a huge growth when we consider the fact that less than 10 years earlier most of India's Electricity was produced from Non Renewable Sources such as coal and other fossil fuel powered thermal power plants. Also when we take a look at India's electric vehicle sector we see that in a span of just 2 years post covid from 2021 to 2023 more than 13 lakh electric vehicles have been bought [8]. This makes India one of the largest markets for the renewable energy sector. However when we take a look at the companies that hold a market share for electric vehicles we find that Tata Motors alone holds around 81.4% of the total market share for all electric vehicles sold in the financial year 2023 in India [9]. The Other competitors to Tata Motors are Hyundai motors and Ola which specializes in producing only electric scooters.
Impacts of Mergers and Acquisitions in the renewable Energy Sector in India :
When we look at the above statistics and facts and figures, it shows is that a few companies hold a majority of the market share for various aspects of the renewable energy sector such as Tata Motors which holds 81.4% of the total market share for all electric vehicles that was sold which is them followed by ola and Hyundai Motors which control the rest of the market. In the light of the above information we find out that even a simple merger between Tata passenger electric mobility Private Limited which produces most of the 4 wheeler electric vehicles in India and Ola electric mobility Private Limited which manufacturer most of the two wheeler electric vehicles in India will lead to a Monopoly being established in the manufacture, production and sale of electric vehicles in India because these two companies control more than 90% of the entire market share of all electric vehicles being sold in India. Such a situation will lead to not just domination of these merged companies over the other new players into the electric vehicle market but it will also lead to a violation of the Directive Principles of State Policy which is enshrined in the Indian Constitution under article 39 clauses (b) and (c) which state that the State shall direct its policies towards ensuring :
(i) that the ownership and control of material resources of the community are so distributed as to best serve the common good [10] ; and
(ii) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment [11].
This is because in the above mentioned scenario when a merger takes place between two companies holding most of the market share for electric vehicle manufacture, production and sale, it will ensure that the material resources [in this case low cost/cheap & efficient electric vehicles] which are supposed to be distributed to best serve the common good will now be concentrated in the hands of one company which can dominate the market and in doing so it will lead to the concentration of wealth in the hands of a select few who own and control the company and also the means of production which will in turn lead to the common detriment of the rest of the citizens who are not holding as much wealth and power or influence within the market as the select few companies hold inevitably leading to a monopoly and to the exploitation of the masses.
Suggestions and Conclusion :
One of the ways to prevent the scenario mentioned above in the renewable energy sector is by preventing such a merger which can lead to complete domination or a monopoly being established over the entire market. Thus a feasible solution would be to make an amendment to the already existing Competition act, 2002 setting a baseline of 40% of the market share. In other words, companies in the renewable energy sector having a combined market share of more than 40% should not be allowed to merge for the sole reason that they can dominate the entire market and only in extremely exceptional circumstances such as bankruptcy of the parent company the merger of the company must be approved subject to a strict review by a joint body comprising of the former members of the National Company Law Tribunal and also the former members of the Competition Commission of India.
Also in order to prevent companies from bypassing such a law, another law must be made wherein companies in the renewable energy sector having a joint market share of more than 40% for any product will not be allowed to start a joint venture or a subsidiary company jointly which will manufacture, produce or sell the same product or the variations of the same product that is sold by the parent companies for the reason that these parent companies can then use their influence by virtue of their market share to promote their goods that have been jointly produced under this joint venture or subsidiary company and thus capture the market again.
These measures are very much required as the renewable energy sector is still a rapidly growing sector with a lot of innovations being made and also many more yet to be done and any attempt by few group of Companies to capture the entire market may lead to not just domination but may also hinder the growth of other companies and also hinder innovation and economic growth and job creation that may come through many companies being formed as a result of the innovation boom in the renewable energy sector.
ENDNOTE :
5. Competition Act 2002, s 3 & s 6
10. The Constitution of India, Art 39(b)
11. The Constitution of India, Art 39(c)
ABOUT THE AUTHOR :
SIDDHARTH DAVID D'SILVA is a 4th year student of National Law University Odisha and also the co-founder of the Pulse Legal Blog. His academic interests include Criminal Law, Intellectual Property Rights, Banking Law, Public International Law, International Criminal Law. His extra-curricular interests also include Geo-Politics, Christian Theology and also Political Ideology. He has also completed an online certificate course on the "Moral Foundations of Politics" from Yale University under the guidance of Professor Ian Shapiro.
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